Increased expression of major histocompatibility complex (MHC) class I genes and aberrant expression of MHC class II genes in thyroid epithelial cells (TEC) is associated with autoimmune thyroid diseases. Previous studies have shown that methimazole (MMI) reduces MHC class I expression and inhibits the interferon-&amp;#61543; (IFN-&amp;#61543;)-induced expression of MHC class II gene in TEC. The action of MMI on MHC class I gene is transcriptional but its mechanism has not been previously investigated. In this report we show that using FRTL-5 cells, the ability of MMI and its novel derivative phenylmethimazole (C10), to decrease MHC class I promoter activity, is similar to the TSH/cAMP suppression of the MHC class I and TSH receptor genes and involves a 39 bp silencer containing a CRE-like site. Furthermore, we show that C10 decreases MHC class I gene expression to a greater extent than MMI and at a 10-50 fold lower concentration. C10 also reduces the ability of IFN-&amp;#61543;to increase the expression of MHC class I and MHC class II genes more effectively than MMI,. Finally, we show that C10 is a better inhibitor than MMI of specific protein-DNA complexes formed with a CRE-like element on the MHC class II promoter. These data support the conclusion that the immunosuppressive mechanism by which MMI and C10 inhibit MHC gene expression mimics normal hormonal suppression by TSH/cAMP.